Subway – 38,000 and Still Growing

Doctor’s Associates Inc., dba Subway, recently announced the opening of restaurant #38,000. That’s not a bad milestone for a company started in 1965 by a 17-year-old high school graduate named Fred DeLuca who wanted money for college. The first of what we now know as Subway opened as Pete’s Super Submarines in Bridgeport, CT, after Fred borrowed $1,000 from family friend, physicist Dr. Peter Buck.

By the mid 1970’s, the company they named Doctor’s Associates owned and operated 16 sandwich shops in Connecticut. In order to speed up the growth of the concept, it began franchising. Today, the company’s signature sandwiches can be found in 100 countries, and it serves 2.6 billion sandwiches a year. Systemwide sales (the combined sales generated by all Subway restaurants worldwide) in 2011 were $16.6 billion. Fred DeLuca continues as CEO of the company he co-founded with Dr. Buck.

So what makes the Subway brand so unique and universal? My list of some of the reasons includes the following:

A relatively low (for the foodservice industry anyway) franchise fee of $15,000. The initial franchise fees for other sandwich concepts include Schlotzsky’s at $30,000, Jimmy John’s at $35,000, and Arby’s at $37,500. A high-end franchise such as Ruth’s Chris can run $50,000 and higher.

A targeted site selection process. Unlike most franchisors that review and approve prospective sites that their franchisees have found, Subway has development agents around the country who locate sites, negotiate the terms, and sign the lease. The franchisee then sub-lets the space. If the franchisee is no longer able to operate at that location, the development agent takes over the business until a new franchisee is found. As the old real estate mantra goes, location, location, location. This method prevents well-selected sites from falling into the hands of competitors and allows franchisees to open their business with the knowledge that the company has done its homework in site selection.

A creative product development process. Over the years, the basic submarine sandwich piled high with deli meats and cheese has evolved to reflect the more sophisticated consumer. Instead of plain white sub rolls, we can now select from flatbread or one of a half-dozen store-baked varieties of bread. In addition to ham and salami, buyers can add chicken (buffalo, Tuscan, and sweet onion teriyaki), roast beef, chipotle steak, tuna, etc. Vegetarians and those concerned with sodium and caloric intake can select salads or Veggie Delite sandwiches. Many of its Fresh Fit choices have the seal of approval from the American Heart Association. The chain is now also offering breakfast in many locations.

Memorable and relevant marketing campaigns. Who doesn’t remember Jared Fogle, the formerly over-weight Subway spokesman who lost weight by switching to Subway sandwiches exclusively and beginning an exercise program. More recently, the company has recruited famous Olympians such as Michael Phelps and Apollo Anton Ohno as spokesmen for the brand. The company also introduced a $5 Footlong promotion to great success.

Adaptability. Not unlike a hermit crab, the Subway concept can fit into just about any space. It’s opened in churches and schools, in office complexes and discount stores. Thousands can be found inside convenience stores. A kosher Subway opened in Cleveland, and in Germany a Subway opened on a ship that sails the Rhine River. A Subway dangles from a construction crane at the site of the Freedom Tower in New York City. The brand is also willing to adapt the menu to meet local palates, with habanero sauce offered in Mexico and marinated cottage cheese slices available in India.

Looking forward, there appears to be no limit to the potential for this dynamic and evolutionary company. If you’re interested in learning more about Doctor’s Associates or any other of the thousands of companies included in the Chain Restaurant Operators Database, visit www.chainstoreguide.com or contact Chain Store Guide at 800-927-9292.

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In the month of October, Chain Store Guide received responses from 442 restaurant operators with at least five locations. Of the companies surveyed, 17% said that Android or Apple mobile devices are currently in use inside their restaurants, with Apple being the dominant manufacturer. More than 80% stated they are currently not using any mobile devices.

Linda has worked at Chain Store Guide for fifteen years. Prior to that, Linda worked as a research economist for the federal government, as an analyst for a management consulting firm, and as a freelance writer.